Financial Crisis

[yoshiwara]

They replied very unconvincingly.

They have just published errata.

Apart from simple mistakes and ridiculous weighting there is no display of one way causality and whether more debt >>>slower growth or whether slower growth>>>more debt.

It's all a great shame as Ken Rogoff's a very affable character......but much more shame for those affected by their prognostications around the world.

Not so. What they pointed out was that the critique from Uni of Massachusetts did not overturn the fundamental finding from R+R which is that over the long term growth is about 1% lower when debt is 90% or more of gross domestic product (GDP). They never asserted causality. Their observations have been interpreted as representing a defence of austerity measures and therefore there has been a campaign to discredit their research.

[cheeryble]

@Yoshiwara

I mentioned (1) simple mistakes and (2) ridiculous weighting methods?

As to 1.....well no-one including RR now disagrees.

As to 2.....if you give equal weighting to a single year for a small economy as to ten (twenty?) years of a large economy......well it can certainly be ridiculed, even if the ridicule is unfounded (which most cognoscenti don't think it is). It is at the very least highly questionable.

As to bidirectionality of debt<>lowgrowth, I'm sure RR wouldn't countersay that, how could they, but politicians sure didn't warn the populations they preached to that things aren't unidirectional and I didn't hear RR pointing this out.

Add to that....

in the paper, using mean averages which was much more affected by the mistakes, if I'm not mistaken......and hey I mainly use More or Less for my statistical information so I could be mistaken ( ).....the big deal was that over 90% debt brought about negative growth (RR in their rebuttal claimed they emphasised the median average frankly i'm not sure and it's late to look up). If this was not RR's intention, they should have screamed it from the rooftops.

The point being.....

that it kinda looks like they just happened to get a result as you mention that if they were selective they can say was not too inaccurate.

So I'll stick with "unconvinced".

cheers Cheeryble

[mccw]

So what's your point cheery?

[cheeryble]

So what's your point cheery?

Merely that if you happen to live in a financial-press-free-zone the debate about austerity will be waking up and must be like a hornet nest in the corridors of power in Europe now, and after the greater success of the stimulus-leaning US it's not impossible policy could change in Europe in a loosening direction.

BTW for doom and gloomers the US government are nearly paid off for Fannie.

Not to mention they still own the capital value so this is a great gain already.

"Fannie Mae to pay $59bn to US Treasury

The latest payout takes the total dividends it has paid to the US Treasury to $95bn after an $116.1bn bailout in 2008 to cover mortgage losses

http://link.ft.com/r/8P1R88/K9HVCY/GKT2K2/30BSDW/HI6JPV/ID/h?a1=2013&a2=5&a3=9

It seems the world is still turning.

Edited May 10, 2013 by cheeryble

[midas]

So what's your point cheery?

Merely that if you happen to live in a financial-press-free-zone the debate about austerity will be waking up and must be like a hornet nest in the corridors of power in Europe now, and after the greater success of the stimulus-leaning US it's not impossible policy could change in Europe in a loosening direction.

BTW for doom and gloomers the US government are nearly paid off for Fannie.

Not to mention they still own the capital value so this is a great gain already.

"Fannie Mae to pay $59bn to US Treasury

The latest payout takes the total dividends it has paid to the US Treasury to $95bn after an $116.1bn bailout in 2008 to cover mortgage losses

http://link.ft.com/r/8P1R88/K9HVCY/GKT2K2/30BSDW/HI6JPV/ID/h?a1=2013&a2=5&a3=9

It seems the world is still turning.

mmmmmmm...........BUT

“In the 40 years I’ve been working as an economist and investor, I have never seen such a disconnect between the asset market and the economic reality ... Asset markets are in the sky and the economy of the ordinary people is in the dumps, where their real incomes adjusted for inflation are going down and asset markets are going up.

“Something will break very bad.”

Marc Faber

http://www.theglobeandmail.com/globe-investor/inside-the-market/master-of-doom-marc-faber-is-feeling-gloomy-about-canada/article11788240/

[cheeryble]

mmmmmmm...........BUT

“In the 40 years I’ve been working as an economist and investor, I have never seen such a disconnect between the asset market and the economic reality ... Asset markets are in the sky and the economy of the ordinary people is in the dumps, where their real incomes adjusted for inflation are going down and asset markets are going up.

“Something will break very bad.”

Marc Faber

http://www.theglobeandmail.com/globe-investor/inside-the-market/master-of-doom-marc-faber-is-feeling-gloomy-about-canada/article11788240/

I'm only an economist of 0 years, but:

The Dow of course is still ten percent below it's 2007 peak whcih is still below it's 2000 peak. Naturally I adjust for inflation, but even in nominal terms we have just had the fourth longest wait in history for a new high, few of which are more than two years.

Still.......only four years after the debacle of our time? Whilst you choose not to Midas, some might call a recovery to at least a reasonable level of stability and a thriving market a wonderful sign of increased resilience over history. My personal view is we've got 6 billion bods on the planet all trying to do well. Trying to stop them is like trying to hold back the sea. Economists and investors, because of increasing knowledge and feedback and communication mechanisms are....much as one hates to admit it.....doing a bit better.

Perhaps you were thinking of other asset market highs?

Oil?.....gas?.....metals?....housing?....................I'm searching............................gold?...............................I'm still searching.........................snail antlers?

ps: sure Ken Rogoff can advise.

Edited May 11, 2013 by cheeryble

[midas]

mmmmmmm...........BUT

“In the 40 years I’ve been working as an economist and investor, I have never seen such a disconnect between the asset market and the economic reality ... Asset markets are in the sky and the economy of the ordinary people is in the dumps, where their real incomes adjusted for inflation are going down and asset markets are going up.

“Something will break very bad.”

Marc Faber

http://www.theglobeandmail.com/globe-investor/inside-the-market/master-of-doom-marc-faber-is-feeling-gloomy-about-canada/article11788240/

I'm only an economist of 0 years, but:

The Dow of course is still ten percent below it's 2007 peak whcih is still below it's 2000 peak. Naturally I adjust for inflation, but even in nominal terms we have just had the fourth longest wait in history for a new high, few of which are more than two years.

Still.......only four years after the debacle of our time? Whilst you choose not to Midas, some might call a recovery to at least a reasonable level of stability and a thriving market a wonderful sign of increased resilience over history. My personal view is we've got 6 billion bods on the planet all trying to do well. Trying to stop them is like trying to hold back the sea. Economists and investors, because of increasing knowledge and feedback and communication mechanisms are....much as one hates to admit it.....doing a bit better.

Perhaps you were thinking of other asset market highs?

Oil?.....gas?.....metals?....housing?....................I'm searching............................gold?...............................I'm still searching.........................snail antlers?

ps: sure Ken Rogoff can advise.

But you can't deny that what he says is true ?

It is lucky for the Obama administration that the sheeple have fallen for the lie that the stock market represents the health of the economy.

As Marc Faber points out the stock market and the ability of the general population to spend are going in opposite directions.

Of course is it's going to look like a recovery if so much money is just printed and infused into the market. But if this was the way out why does anyone have to go to work at all?

In a country where consumption represents 70% of GDP, why doesnt everyone should just stop working now and the government can print trillions of more dollars and people can just go out to the shopping centres everyday?

Of course it is going to end sooner or later because it defies logic.

Edited May 11, 2013 by midas

[Naam]

But you can't deny that what he says is true ?

what does he say that can be verified and considered to be true Midas?

Faber thinks and considers.

i am getting Faber's monthly, open it and close it when i see that he

again started his "revelations" with half a dozen quotes which are

not his before his utmost boring tales which friend he has met in

what <insert location> and what they had for lunch.

nowadays he has piped down. no more "buy gold! buy this, sell that!"

fact is that the "famed" investor and worldwide renowned guru has

made far too many bad calls during the last five years.

here's how his may 2013 gloom&doom circular starts

Edited May 11, 2013 by Naam

[cheeryble]

I suggest you are conflating two things:

1. Stock Market

2. Share of wealth received by sections of the population (which I personally consider egregious but little to do with the markets).

You are right in pointing out that your own last post was even more inaccurate with it's talk of sky high valuations as because of your $ devaluation so are all commodities priced in $ and the Dow priced in $ even less "sky high" than what I pointed out.

Happily the Republic of China still seems very happy to be in lockstep with the $ no doubt they are all stupid Chinamen.

As to the appallingness of the ever-falling $ are you aware that a large $ fall preceded the roaring economy of the 90s?

I leave it to you to look up.

[midas]

But you can't deny that what he says is true ?

what does he say that can be verified and considered to be true Midas?

Faber thinks and considers.

i am getting Faber's monthly, open it and close it when i see that he

again started his "revelations" with half a dozen quotes which are

not his before his utmost boring tales which friend he has met in

what <insert location> and what they had for lunch.

nowadays he has piped down. no more "buy gold! buy this, sell that!"

fact is that the "famed" investor and worldwide renowned guru has

made far too many bad calls during the last five years.

here's how his may 2013 gloom&doom circular starts

what does he say that can be verified and considered to be true Midas?

that the stock market and the ability of the general population to spend are going in opposite directions.

" “In the 40 years I’ve been working as an economist and investor, I have never seen such a disconnect between the asset market and the economic reality ... Asset markets are in the sky and the economy of the ordinary people is in the dumps, where their real incomes adjusted for inflation are going down and asset markets are going up."

Edited May 11, 2013 by midas

[midas]

Okay then you people that think everything is so rosy in USA and that the recovery has arrived then surely they now take away the food stamps for 48 million people ? Tell all these 48 million to get a job !!! Either the economy has recovered or it hasn't.

Just try it and see what happens.

Edited May 11, 2013 by midas

[Naam]

Okay then you people that think everything is so rosy in USA and that the recovery has arrived then surely they now take away the food stamps for 48 million people ? Tell all these 48 million to get a job !!! Either the economy has recovered or it hasn't.

Just try it and see what happens.

i have no idea whom you are addressing with "you people". i don't think anything in the Greatest Nation on Earth™ is rosy and i give a "flying" whether 1 million or 50 million Americans are on food stamps. i also don't think that there has been a real and sustainable economic recovery in most industrialised countries. what i reject is that we are on the brink of a global abyss.

i also reject the constant wailing of both gurus and laymen who can't come up with any solution to rectify the various situations which they think are "wrong". my focus is primarily on how to get my fair share of crumbs which fall from the tables where the big boys are dining. secondary is to watch out not getting trampled upon when the big boys have finished their dinner and walk to another table to feast.

[NanLaew]

Europe still dodging the bullet... looks like Spain really is the basket case that it always has been.

http://blogs.telegraph.co.uk/finance/jeremywarner/100024476/spain-is-officially-insolvent-get-your-money-out-while-you-still-can/

It must be getting tough on the few with real money to physically manhandle all their money bags from one financial toilet (like Ireland) to the next (like Cyprus).

Edited May 11, 2013 by NanLaew

[Naam]

what does he say that can be verified and considered to be true Midas?

that the stock market and the ability of the general population to spend are going in opposite directions.

and... where's the beef? what is he trying to tell us? that this will cause Som Tam to be more expensive next week?

[Naam]

Europe still dodging the bullet... looks like Spain really is the basket case that it always has been.

http://blogs.telegraph.co.uk/finance/jeremywarner/100024476/spain-is-officially-insolvent-get-your-money-out-while-you-still-can/

It must be getting tough on the few with real money to physically manhandle all their money bags from one financial toilet (like Ireland) to the next (like Cyprus).

most of those who have real money to "manhandle" are smiling when they read layman's assumptions.

[cheeryble]

what does he say that can be verified and considered to be true Midas?

that the stock market and the ability of the general population to spend are going in opposite directions.

If there's a comment on social justice somewhere in there he's late to the party social immobility is well documented and measurable, any economist of 0 years experience like myself knows it.

Is he trying to link it to the stockmarket? How?

If no how, why mention it?

ps: It's an easy trick to use others' quotes to try to make oneself wise, I have been known to do it myself and I'm still having trouble connecting one brain cell with the other two..

[NanLaew]

Okay then you people that think everything is so rosy in USA and that the recovery has arrived then surely they now take away the food stamps for 48 million people ? Tell all these 48 million to get a job !!! Either the economy has recovered or it hasn't.

Just try it and see what happens.

i have no idea whom you are addressing with "you people". i don't think anything in the Greatest Nation on Earth™ is rosy and i give a "flying" whether 1 million or 50 million Americans are on food stamps. i also don't think that there has been a real and sustainable economic recovery in most industrialised countries. what i reject is that we are on the brink of a global abyss.

i also reject the constant wailing of both gurus and laymen who can't come up with any solution to rectify the various situations which they think are "wrong". my focus is primarily on how to get my fair share of crumbs which fall from the tables where the big boys are dining. secondary is to watch out not getting trampled upon when the big boys have finished their dinner and walk to another table to feast.

Good point!

There has been no real recovery; not even a hint of one.

Just because (for example) Hester at RBS is crying that he can't even give his banks money away, they aren't exactly doing anything to encourage loans for investment. For that matter, neither are the governments that own the banks that 'can't give it away'.

Individual entity defaults and collapses won't matter much but when there's a significant, simultaneous default, then all bets are off. The Euro is living on the premise of 'too big to fail' that we know doesn't apply any more. Once the dollar loses it's preferred reserve currency (and it will), then the gloves are off and people better be able to either swim or have the ability to tread water for a while.

One man's dining table is another man's toilet.

[midas]

Okay then you people that think everything is so rosy in USA and that the recovery has arrived then surely they now take away the food stamps for 48 million people ? Tell all these 48 million to get a job !!! Either the economy has recovered or it hasn't.

Just try it and see what happens.

i have no idea whom you are addressing with "you people". i don't think anything in the Greatest Nation on Earth™ is rosy and i give a "flying" whether 1 million or 50 million Americans are on food stamps. i also don't think that there has been a real and sustainable economic recovery in most industrialised countries. what i reject is that we are on the brink of a global abyss.

i also reject the constant wailing of both gurus and laymen who can't come up with any solution to rectify the various situations which they think are "wrong". my focus is primarily on how to get my fair share of crumbs which fall from the tables where the big boys are dining. secondary is to watch out not getting trampled upon when the big boys have finished their dinner and walk to another table to feast.

Of course you don't have to do give a " flying" right now because of the very fact that they are still on those food stamps.

But if anyone tries to take them away......... I'm not saying you would necessarily feel the direct consequences sitting in Pattaya , ................but I feel pretty sure you will see some quite scary images on our television screens.

This would not be a " global abyss " as you say , but it could represent a pretty horrific breakdown of law and order with 48 million hungry and unemployable people. ( Personally, that is why I believe they are so desperate to push through the gun laws so quickly but that is a different debate).

And I disagree with you that people have not suggested solutions. The first one is to stop extending and pretending

Edited May 11, 2013 by midas

[midas]

what does he say that can be verified and considered to be true Midas?

>that the stock market and the ability of the general population to spend are going in opposite directions.

and... where's the beef? what is he trying to tell us? that this will cause Som Tam to be more expensive next week?

That in a country whose economy is so highly dependent on consumption ..........that the consumers are skint

[midas]

what does he say that can be verified and considered to be true Midas?

that the stock market and the ability of the general population to spend are going in opposite directions.

If there's a comment on social justice somewhere in there he's late to the party social immobility is well documented and measurable, any economist of 0 years experience like myself knows it.

Is he trying to link it to the stockmarket? How?

If no how, why mention it?

ps: It's an easy trick to use others' quotes to try to make oneself wise, I have been known to do it myself and I'm still having trouble connecting one brain cell with the other two..

You can't be serious?

[Naam]

And I disagree with you that people have not suggested solutions. The first one is to stop extending and pretending

that's indeed a detailed, precise and detailed description of a feasible solution. hats off!

[Naam]

This would not be a " global abyss " as you say , but it could
represent a pretty horrific breakdown of law and order with 48 million
hungry and unemployable people. ( Personally, that is why I believe
they are so desperate to push through the gun laws so quickly but that
is a different debate).

based on my experience even people on food stamps own guns in the

U.S. of A.

[NeverSure]

I am missing something in this discussion, regarding the US.

I want to be very careful not to sound like a US cheerleader. I'm very concerned about US fiscal policies.

BUT there is one thing which could explain why the stock market could correctly go up while at the same time US consumers lose buying power.

That one thing is international trade. Even if you hate the US, it would be dishonest to not agree that many of the innovations which are driving the world economy came from the US. Many US corporations are making a fortune on that.

Might I mention Google as an example? How about the internet and the backbone that drives it, and MSN and Yahoo and Ebay and Amazon and Skype and...

Then there is software. We can't write or see many websites without Java. Microsoft? Photoshop? Pagemaker?

So many US corporations are making money worldwide, in other countries that I can't even quantify it.

There is hardware like CNC machines and 3D printers. There is Caterpillar and John Deere with their industrial divisions. Yes sales are down some but they are huge globally.

Walmart has about 1/2 of its stores located outside the US with room to grow. How about McDonalds and Burger King and KFC? They certainly aren't limiting themselves to the US consumer.

Boeing just sold another huge order of aircraft to overseas customers.

Much of the world's military units buy and use US designed and built hardware. India is the biggest customer for that. What does a fully equipped fighter jet cost these days?

Hate it, love it, or be neutral, it would surprise me if someone couldn't see that much of the US corporations, and therefore their values, have grown from overseas sales and growth, not from selling to the US consumer.

Edited May 11, 2013 by NeverSure

[mccw]

I think it is a matter of opinion as to whether it is considered off topic? This subject of the thread is entitled financial crisis and I think you'd have to have a pretty blinkered view not to see the possibility that when they can no longer maintain the charade of keeping up appearances this will deteriorate into social unrest.

The US General Accounting Office told Congress and Obama that the US has more untapped oil reserves in just one place along the Rockies, than

all of the rest of the world's reserves combined. Link Link This isn't counting what's in the Gulf of Mexico or in Alaska or off the Atlantic and Pacific, or what's already being pumped.

The US is set to become the world's largest oil exporter by 2017.

It's too early to pronounce the death of the US.

"About half recoverable depending on drilling technologies and economic conditions"

There lies the rub. Peak oil isn't saying we are "running out of oil" its that we are running out of "cheap oil" ie future oil use will be costing more in energy terms to extract and so the costs will be inflating at the pump and all down the oil dependant supply chains ie affecting almost everything.

[NeverSure]

I think it is a matter of opinion as to whether it is considered off topic? This subject of the thread is entitled financial crisis and I think you'd have to have a pretty blinkered view not to see the possibility that when they can no longer maintain the charade of keeping up appearances this will deteriorate into social unrest.

The US General Accounting Office told Congress and Obama that the US has more untapped oil reserves in just one place along the Rockies, than

all of the rest of the world's reserves combined. Link Link This isn't counting what's in the Gulf of Mexico or in Alaska or off the Atlantic and Pacific, or what's already being pumped.

The US is set to become the world's largest oil exporter by 2017.

It's too early to pronounce the death of the US.

"About half recoverable depending on drilling technologies and economic conditions"

There lies the rub. Peak oil isn't saying we are "running out of oil" its that we are running out of "cheap oil" ie future oil use will be costing more in energy terms to extract and so the costs will be inflating at the pump and all down the oil dependant supply chains ie affecting almost everything.

OK, Look at my post right above where I told how much it cost to fill my pickup. If a person lives in Europe he can get a skewed view of the real cost of gasoline. The same is true of Canada and I don't know about Australia's prices.

These prices above the US$3.59 per gallon (2.8 GBP per UK gallon) are taxes imposed by the governments. We have state and federal taxes too that total more than $1 per gallon, meaning we are actually paying about $2.50 per US gallon or less than 2 GBP per UK gallon.

The massive bonanza of oil in North Dakota is in shale and it's being brought out at a profit. it is making the state wealthy.

Peak oil is subject to debate. There are more known oil reserves today, with a longer life span than there were just two years ago. We're finding it faster than we are using it. Also the US has massive amounts of natural gas that aren't being used because no one is bothering to use it. There is probably a 100 year supply. I have to believe that if this world is still here in 100 years, that scientists will have gotten us away from using oil or natural gas to power our cars and trains.

Remember, even if one doesn't approve of the shale oil recovery in Canada which is making Canada well, or the shale oil recovery in N. Dakota, there are still massive reserves in the Gulf of Mexico, off the Pacific and Atlantic Oceans, in Alaska, and it has for decades been on the US mainland.

The sky is not falling.

[metisdead]

Off topic posts have been removed.

[mccw]

The great thing about this thread is that financial crises covers everything including, budgets, deficits, policy, spending, tax, growth, regulation or lack of it and so on etc etc etc. the wide remit enables proper discussion and consideration of the OP and thread title

[mccw]

I hope this is deemed relevant to financial crises:

""""Portugal, which is entering the last year of a three-year European Union aid program, will likely need further help from Europe at a time when core countries in the region, such as Germany, are fast losing enthusiasm about providing financing to ailing peripheral nations.

The most likely solution to this problem, according to analysts at Credit Suisse, isn’t a second bail-out but instead that European institutions offer Portugal a credit line until the country can make a full return to debt markets.

This is important because the strict budget cuts imposed as part of the EU-IMF aid package have begun to wear on the national psyche, triggering large demonstrations across the country in recent months as unemployment remains high and growth sluggish. Further unrest could spread across the region, fuelling further rebellion against bail-out inspired austerity.

“The credit line is the most appropriate instrument to provide to the country because (Portugal) has one foot in the market (having already refinanced some bonds), and the goal with the credit line is to support a full return to the market,” Credit Suisse analyst Axel Lang told The Financialist.

“It is an instrument that is less costly for the core countries to provide because it’s a precautionary credit line that may or may not be used by Portugal,” said Lang, who said a final decision on the matter isn’t likely until after the German elections in September.

Portugal is expected to face an estimated €12 billion (about $15.8 billion) funding gap in 2014, when its €78 billion bailout ends and as it struggles to pull itself out of a brutal recession. The country’s GDP contracted by 1.8 percent in the last quarter of 2012, and Credit Suisse expects the economy to shrink by 3 percent in 2013. Unemployment remained at 17.5 percent for the third straight month in March, according to Eurostat.""""

-From biz insider app

Key points:

Running out of cash

Deficit spending and total unsustainable

Economy still contracting

"A credit line would be less costly" err than what exactly? Growing money away is costly which ever way you choose to do it.

And this is just Portugal ; the others are all in a similar mess and Slovenia soon to join the mess.

Endless credit lines? Or more like a regional bail in?

Financial crises is not over

[mccw]

Meanwhile in Greece-

"""Greek unemployment is said to be more than twice the Eurozone average, with overall joblessness at a record high of 27 percent. Athens cut the minimum monthly wage for those under 25 years old by 32 percent to about 500 euros in a bid to boost hiring, but joblessness in the 15-to-24 age bracket recently soared from 59.3 percent in January to 64.2 percent in February."""""

-rt app

[mccw]

The Greek teachers are striking right when its Uni exam time. Because they have been asked to work an extra 2 hours per week.